Your Emotions Play a Bigger Role in Money Than You Think
In this solo episode, Michelle gets into the topic of money psychology and the impact of emotions on financial decisions. With 20+ years of experience as a financial planner, Michelle shares her observations and opinions about balancing the emotional and logical sides of managing wealth.
Key Topics Covered
The Emotional Side of Money
Investment Decision-Making
The Value of Accountability
Budgeting & Emotional Spending
Learning from Losses
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Introduction to the Unconventional Investor Podcast
Welcome to the Unconventional Investor Podcast. I'm your host, Michelle Moses, certified financial planner, licensed realtor, and founder of ME Financial. If you're an accredited investor feeling overwhelmed by managing your portfolio and looking for alternative investment strategies that go beyond the traditional stock market, you're in the right place.
Let's head into today's episode so you can start taking control of your financial future. Hello everyone, and thank you so much for tuning in.
The Psychology of Money
This is going to be a solo episode of me talking about the psychology of money, how your emotions impact financial decisions. And this is something that is super near and dear to my heart that I think I spent the first 15 years of my career studying, going to classes for doing myself and really, figuring out my shit because I need to figure out mine before I can help other people. And I think this is really important because I think it's something that is 50%. Of your financial life is your emotions. It is not the spreadsheet. It is not the numbers. The numbers are all one thing and you need to know those.
But the other 50% of your financial life is your emotions and your beliefs about money and how you feel when you make those investments or spend your money.
Emotional Impact on Investment Decisions
So I'm going to give some quick examples of what I'm talking about. So there's a lot of times where people will make investments and they're completely focused on the income that they're gonna make, and oh my God, this, whatever restaurant could be such a big deal.
And it's downtown and, you're caught up in all of the lights and what it could be in. People, I find that people aren't necessarily always looking at the downside. They're looking at, oh, I'm finally able to. Get out of my 401k and invest in something that I'm excited about. And I totally, absolutely get that.
And when you are excited about something and you're looking at that, what I often see is that either people are overexcited or they're under excited. And what you're looking for obviously is like right in the middle. And I know nobody wants to hear that. 'cause I didn't want to hear that. You wanna hear, oh, I'm like so overexcited about this.
This has gotta be it. And usually when you're overexcited and you've got. Rose colored glasses on about it. It's not usually I guess unless you know what you're talking about, but it's if you don't know what you're talking about and you're getting into an industry that you don't even really know, I would say the rose colored glasses of, this is gonna be so amazing and we're gonna be in the newspaper, or, all I've seen people, do all that.
Or the potential for this app is so huge. Yeah, there's a lot of potentials out there for business ideas. There's tons of them. And I'm not saying some of them aren't a good idea, but the execution and the people that you invest with are also very important. And so I, I see a lot of times people getting overexcited about something.
And then the other part of it is I think people following their emotions, or I would call it their intuition about an investment is if they just can't get themselves to do it. And my experience is if you can't just can't get yourself to do it, and you're not really avoiding things like you are paying attention to your money, you are investing, you are paying attention to what it's invested in you've already got all of that down.
Like you're good with your money. I think that if you just can't seem to pull the trigger or it's just eh, I haven't thought about it since you even talked about it, then don't do it. And like a lot of times when I meet with people and I give them ideas of here's what we can invest in.
I've got this and this. A lot of times what I'll say is go home. And the one that you can't stop thinking about, that's the one that we're gonna do. And if they don't like any of 'em, that's fine, but most of the time they really like one. And most of the time in the meeting they're like no.
This one is the right one. And I think that's where the value of working with someone, it's like a coach, is that someone like me can. Remind you of what your goals are and the other things that you said that you wanted, to balance it. Hey, you also wanted to do this insurance over here, so if you wanted to do that, then we could do, this investment along with the insurance.
And so a lot of times it will come together like that when it's a good partnership. And that's what you're looking for. I think if you were working with an advisor then, they can help you to work through some of your emotions of what is a, whether you're overexcited or not excited and be able to give you that feedback.
But those are the two areas that I see of your emotions getting, with your financial decisions. And then the other way, and that's with the like big investments.
Budgeting and Everyday Spending
The other way, what I would say would just be like everyday living, and I've talked about this a million times before, but your budget and the way you spend money every single day is where the tire meets the road.
That is where the answers are of whether you're gonna have money in the bank or you're not. That's just there's no way around it. So if you are budgeting and you are saving. I would argue you need to know where your money is going because then you can look at what your emotions are. And so for me, I cannot have any stipulations on the amount that I spend at a grocery store.
And I'm not saying that I go crazy, but I have to be able to buy the random bag of whatever, oh look, this just came out. I really want to try this. So I am like queen of, look at this sauce. I want to try this sauce. Or look at this new cookie. I love cookies. I want to try this one. I cannot go to the store.
Like those people that go to the store and they have a list of everything that they're gonna get and that's all that they get and they've added it up. And that's just so not the way that I am. And I don't think it's the way most people are. Most people want freedom, right? And you want freedom to spend in all these categories, but you need to choose when you're doing your budget, I guess is what I'm saying, is.
Choosing which category are you gonna have a limit in? And are, is it gonna be your phone bill? A lot of those kinds of things that you can control a little bit and are fixed. You could, not have the Apple Watch or you could not have, you can cut down on certain things.
You can cut down a lot of the subscriptions like Netflix and stuff like that. So a lot of that will help you feel better. And you're. Emotions if you're doing a budget, can be in check more because you know exactly what you're spending and you know if you have the money to spend it. And it, even as you make more money doing the budget, I have people that do budgets and they make a lot of money.
Million dollars a year. And they still do a budget and they claim that it is still. The way that they stay on top of their money, they know where it's going, and that is what I hate because, I started a budget when I was making nothing and I started my business and then now we really don't need to worry about it.
But I love it because I don't like not knowing where my money is. Going because some days it's wow, we have spent a lot on kids activities, haven't we? I don't know. I need to go back and do the budget. And so I really like knowing okay, that got a little outta control. Next month we're not gonna, go to the jump place as much.
And so keeping your emotions in check with your budget, like that really helps. That is where the tire meets the road, right? So keeping your emotions in check with the budget then helps you with all the long-term stuff of what you're saving for. Because then it's okay, I can keep this in check of, I don't need to go to the mall all the time to buy clothes.
I'm fine with just spending such and such amount. So you're in control of that, right? And so then you feel like, yes, I can save towards my long term. Goals, and so I know it's very subtle and it's all very personal and you need to. You just have to practice. And it's like your intuition, it is. You need to listen to your gut and it's all about practicing and using it and trusting yourself. And it is the same thing about your emotions and money. It's trying things out.
Learning from Financial Mistakes
And so my last point about the emotions and money is that you are going to mess up. You are going to make some bad investments.
They're not all going to be amazing and you cannot get down on yourself. So I have shared that. I've lost I did lose quite a bit of money with the crypto, the the fx, I think it's FX anyway, the guy that lost the billions of dollars a year and a half ago. And it's not like it wiped us out, but I was disappointed, and sometimes I feel like, okay, it's good to humble yourself a little bit.
And to get caught up in that, because I was testing out all these different platforms and so I had crypto like at four different places. And so fine, it's my job, I do feel like sometimes I'm, trying some of these things out so that I can give advice, but at the same time, I can't get all caught up.
And I, you need to know that sometimes this stuff can go sideways, but you just need to keep going. It's a new day. It's like eating, like just because you overate at a meal doesn't mean you need to overeat at the next meal. It's just a new meal, and so then you just like start over.
So it's the exact same thing with money is like you're just. Starting over and just okay, I lost the money on that one, but we're gonna go on this one. And I hit this stock right? And I made a ton of money. And the key to having money is just to consistently save. It's obviously to make more money too, but it's to consistently save.
You're always gonna be trying to spend more, think that we live in shiny penny land. Maybe as a woman I'm like that. I don't know if it's like that for everybody, but I do think people tend to overspend and doing a budget again, where the tire meets the road then allows you to make better decisions for your long term in your retirement.
And how you want to invest that way.
Personalizing Your Investment Strategy
And I was actually thinking about this last week and about. Who do I want to be in my investments and what's gonna make me feel good? And I really just had to sit there and think about all of these different investments of what was going to be really serving me and what did I feel good about?
What made me feel rooted? And that's what you're wanting. You're wanting to feel grounded, you're wanting to feel rooted. And if you're at the beginning of your journey and that feeling rooted is gonna be having $25,000 in a savings, like a high yield savings account for your emergency fund, then focus on that.
But as you get, as you have more and more in your portfolio. What is going to make you feel good, especially going into retirement? Is it gonna be having one big 401k or is it gonna be that you're investing in a couple different businesses and then you can see it all on a graph? Is it going to be that you're investing in like environmental type, the ESG type investments?
Or is it gonna be, I really believe in oil and gas, some of these things. It's all very personal. It is just, again, with the food reference, it is like eating. No two people eat the same way and feel great in their body, and it is trial and error of. What are you allergic to? What are you not?
And that is exactly what money is, but our society doesn't allow us to fail in this category. I don't feel and I am here to tell you that you are going to have some small failures. Yeah, they suck. It absolutely sucks because it's like, you lose a $20 bill like on the ground somewhere, or somebody takes it from you.
That's what it feels like. But you need to look at it more of a standpoint that you are learning. And that is what this whole thing is about learning what's good for you, learning what you want, and you're not gonna be able to do that if you aren't saving, if you aren't opening the accounts, if you're not getting in there and trying some things, trying sports.
How do you know whether, as little kids, right? They try soccer, they try baseball, they try all these different things. It's the same thing with your money as like you're trying some things, you're doing some research and again, you're not gonna get it all right. And some of them are gonna go right, and it's gonna be wonderful.
And is it is, it's a great feeling. And you just. You just gotta stay in there. I, there's no other way around it. You just gotta stay in there and keep trying. Again, I think it's how you get better in sports. It's how you get better at eating. It's how you get better at money, and it all goes together.
I have learned a lot over the years. By no means am I some sort of guru that knows everything, but. I know that I, as a woman advisor and I just haven't seen a lot of men in my industry that will say that emotions are probably 50% of your financial decisions. Because whether you feel good about something or not, that is going to drive more of your financial decision than anything else.
If you don't like the investment, if you don't like the person, that kind of stuff, it's going to deter you from. Investing in some of these things. And I just want you to watch what you get super excited about. Oh my God, everybody's into real estate investing right now. I really need to get into that.
It might be too late because there are so many people in real estate investing. It's like I saw that Italy was cutting off the passport thing, whereas even if you had a distant relative, you could get a passport because companies had, they had, companies had opened up to sell this.
Service for people to get a, an Italian passport. And now they're limiting it to only parents and grandparents. And so it's great if you got into it when it was very obscure, but now that it has become so popular, then it's like a big shiny light is on it. And so that's how I feel about the real estate investors is that there's so many of 'em.
But I live in Phoenix. I don't know how it is everywhere else, but in Phoenix. A very large portion of the economy is built on real estate because we have so much land and new buildings going up, and there are so many real estate investors that you really need to have a well-oiled machine, I think, to compete in this market versus if you were somewhere else.
The point of it is if you were not willing to go that deep and have that mastery of it, it might not be the best place to go, but you could possibly find something else. And none of it is gonna be overnight. A lot of it is years of studying and learning things and putting different things into place and, getting the essence of what you want to do for a little bit so that you can then go towards it and.
I just think that people have thought that, oh, I'm just gonna either hand this over to somebody so that they can make all my decisions and then I'll make money. And you're not gonna make money that way because you are trying to wash your hands of it. But if you are truly trying to partner and learn about it, then I do think that people will make money and things that you've been thinking about for a while, then it's, okay, I'm gonna sign up for that class, or I'm going to, invest in that particular investment.
I think it makes a huge difference. And the other reason that I say that financial decisions are 50% of it is because I want you to be able to sleep at night. You do not wanna take so much risk. That this one investment has to return, such and such percent in order for you to make money. It's like these people that you see online, they sell everything and they go into one stock.
I could think of nothing else that would be more stressful. You don't wanna do any of that. You wanna be able to think, to sleep at night, to know that you're taking care of things and that you're paying attention to them and looking at your money is. Half the battle and when I first started, I would look at it twice a week just to make sure I knew where everything was going and that I didn't overspend because I would overspend a lot at like restaurants and going out to eat and shopping, just normal girl stuff.
And. Or maybe it's male stuff too, and you you just wanna watch it and then you feel proud of yourself. So there is, you gotta pay attention to your feelings around your money.
Final Thoughts and Contact Information
And if you have any questions, honestly gimme a call. I know that I don't have counselor written after my name, but I think any financial advisor will tell you that we feel like financial coaches, there's a lot of emotional baggage that goes with all of this.
There's a lot of financial trauma that happens where people freak out. And it is important to address that kind of stuff just like you would if you were getting into a new relationship and you had trauma from another relationship. You want to deal with it, and you want to admit like money is an important part of your life.
Just like your health is important and your relationships are important, money is an important part that you do need to look at. So I hope this is just a, fun little tidbit car ride for you guys and that you got something from it. If you do want a call, I do have 15 minute free consultation on my website.
And there is a quiz on there too. So feel free to take that. And thank you so much for listening. If you do have some time, please take review the show. It really helps the algorithm and to have for me to reach other people that I don't know personally. So thanks so much for listening. I hope you have a great day.
Thank you for listening to the Unconventional Investor Podcast. I hope you feel more confident in how you can grow your wealth using the strategies I shared in this episode. If you're ready to take the next step in diversifying your portfolio outside the stock market with alternative investments, head to me financial.net/contact us to book a 15 minute consult call with me.
Let's discuss how we can work together to achieve your financial goals. Until then, I'll see you on the next episode.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.